ATO urges small business to come clean on $30 billion of debt

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The Australian Tax Office is reminding small businesses of an amnesty on penalties for those who have failed to lodge income tax returns, fringe benefits tax returns or business activity statements as it chases $30 billion in tax debt.

The amnesty applies to tax obligations that fell due between the start of December 2019 and the end of February 2022 and expires at the end of this year. To be eligible, a small business must have an aggregated turnover of less than $10 million at the time the original lodgement was due.

Tony Greco, general manager for technical policy at the Institute of Public Accountants, says amnesties are used by the ATO in situations where it believes there are a significant number of non-compliant taxpayers.

The ATO has an amnesty for small businesses who have failed to lodgement, but it expires at the end of this year.Credit: Luis Enrique Ascui

Greco says the ATO takes a “carrot and stick” approach. “Come forward, and we’ll waive non-lodgement penalties, but do nothing, and we’ll come after you,” he says.

Emma Tobias, ATO assistant commissioner, urges small businesses to take advantage of the amnesty to get back on track with their tax obligations if they have fallen behind.

“The past few years have been tough for many small businesses, with the pandemic and natural disasters having a significant impact,” Tobias says. “We understand that things like lodging ATO forms may have slipped down the list of priorities, but it is important to get back on track with tax obligations.”

A small business, as defined by the ATO, includes a sole trader, company, trust or partnership that operates a business with an annual turnover of less than $10 million.

During the worst of the COVID-19 pandemic, the ATO temporarily paused its tax debt collection activities to assist struggling small and medium-sized businesses, before resuming collection activities.

During 2019-20, about $12 billion was owned to the ATO by small businesses. That has now grown to about $30 billion of debt that is collectible by the ATO; which includes about $1.6 billion in superannuation payments owed to employees.

Much of that will likely be owed by very small businesses, such as sole traders, who fell behind in filing with the ATO during the lockdowns, bushfires and floods.

When filings are made to the ATO under the amnesty, businesses or their tax professionals will not need to separately request a remission of the failure-to-lodge (FTL) penalties.

“All you need to do is lodge your outstanding tax returns or activity statements, and we’ll take care of the FTL penalty remission from our end,” Tobias says. “You might see an FTL penalty on your account for a short period of time, but don’t worry, we will remit it.”

The amnesty does not apply to superannuation obligations and excludes other administrative penalties, such as penalties associated with the Taxable Payments Reporting System.

Businesses that have failed to lodge because they have ceased trading need to advise their registered tax professional, or the ATO directly.

Greco says amnesties have been used selectively in the past, and the last amnesty was for superannuation guarantee payments, where employers were given a chance to make good any past underpayments.

Some 28,300 employers came forward, recovering more than $910 million dollars of underpayments, he says.

“This shows the power of amnesties to encourage people back into the tax system,” Greco says.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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